Journal Article

The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery

Laurens Cherchye, Bram De Rock and Frederic Vermeulen

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 78, issue 1, pages 176-198
Published in print January 2011 | ISSN: 0034-6527
Published online January 2011 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1093/restud/rdq018
The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery

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  • Econometric and Statistical Methods and Methodology: General
  • Household Behaviour and Family Economics

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We present a revealed preference methodology for empirically analysing collective consumption behaviour. First, we introduce an integer programming (IP) methodology for testing data consistency with collective consumption models that account for publicly as well as privately consumed goods. This IP methodology can include information on “assignable quantities” for private goods. Next, we show that the IP methodology allows for recovering the personalized (Lindahl) prices for the public goods and the personalized quantities for the private goods. In turn, this implies recovery of the sharing rule (i.e. personalized income share levels). An empirical application demonstrates the practical usefulness of the methodology.

Keywords: Collective model; Revealed preferences; Data consistency tests; Recovery; Integer programming; Sharing rule; D11; D12; D13; C14

Journal Article.  10288 words. 

Subjects: Econometric and Statistical Methods and Methodology: General ; Household Behaviour and Family Economics

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